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why is the procedure for valuing a bond with an embedded option called backward induction? Why is the Value producded by a binomail model and

  1. why is the procedure for valuing a bond with an embedded option called "backward induction?
  2. Why is the Value producded by a binomail model and any similar models referred to as an arbitrage-free value?
  3. In explaining the option-adjusted spread to a client, a manager stated the following: the option-adjusted spread mesaures the yield spread using the Tresury on the run yield curve as benchmark intrest rate. Comment on this statement
  4. What type of information can credit analyst from an analysis of the statment of cash flow?
  5. What is the underlying principle in assessing the creditworthiness of municipal revenue bonds?
  6. Why do rating agencies assign both a local currency debt rating and a foreign currency dent rating to the bonds of a sovereign government?

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